Last week, the Ohio Supreme Court issued three decisions upholding commercial activity tax (CAT) assessments on out-of-state retailers with no physical presence in Ohio.  Out-of-state and online retailers, having more than $500,000 in gross receipts in Ohio sales, are deemed to have met the bright-line presence test for nexus with Ohio.

The taxpayers argued that their nexus to Ohio was not “substantial” because they lacked physical presence in Ohio.  The Court stated that its reading of the case law indicated that the physical-presence requirement, recognized and preserved by the U.S. Supreme Court for purposes of use-tax collection, does not extend to business-privilege taxes such as the CAT and that the $500,000 sales-receipt threshold set forth in the CAT statute satisfied the commerce clause requirement of “substantial nexus.”

Unfortunately, it is expected that other states will use this ruling in applying their own gross receipts tax to out of state sellers continuing their efforts to increase their respective state tax revenues.